Exit delivers exceptional returns to investors in UK’s largest venture capital trust (VCT)
Octopus Ventures has exited from SwiftKey, the company behind the app for faster, easier typing on mobile phones and tablets that is now being used on more than 300 million devices worldwide, delivering what it is describing as ‘exceptional returns’ to investors in its Octopus Titan Venture Capital Trust (Titan VCT).
The news follows the acquisition of SwiftKey by Microsoft with the deal highlighting the important role VCTs play in developing the next generation of disruptive technologies and UK business. VCTs provide investors with the opportunity to share in the growth potential of companies such as SwiftKey and in a tax efficient way.
While SwiftKey is now a household name for many people around the world, it is less well known that it has been backed by VCT funding from an early stage providing retail investors with the opportunity to share in its success story.
This high profile exit comes in the middle of the tax year end fundraising season, which typically marks increased interest in VCTs as investors look to take advantage of their annual allowances for investments such as pensions, Individual Savings Account and VCTs ahead of the tax year-end deadline. This year is expected to be even busier than usual for the VCT industry due to the continuing restrictions on pension investment allowances prompting investors consider the available tax efficient alternatives to complement existing retirement plans.
The tax benefits of VCTs are attractive and include up to 30 per cent upfront income tax relief, tax-free dividends and tax-free growth, providing that shares in the VCT are held for at least five years by investors who are comfortable with the risks associated with investing into smaller companies. But many investors are equally focused on the underlying growth potential of their investments into entrepreneurial companies such as SwiftKey.
Current investors in the Titan VCT will be delighted with the exceptional return on investment and 5p special dividend, [to be paid in addition to the 2p regular dividend], that SwiftKey’s growth and recent exit has delivered. Potential VCT investors should also consider the long term track record and future potential of the other portfolio companies contained within the Titan VCT portfolio.
In addition to the dividend, the proceeds from today’s sale of SwiftKey will be used to make further investments in established portfolio companies, as well as funding new early stage companies. The current portfolio includes some of the UK’s most exciting young companies, including online furniture business Swoon Editions, augmented reality display technology provider WaveOptics and well-known household names including Secret Escapes, the members only holiday company and Property Partner, the residential property crowdfunding website.
For Titan VCT, the largest VCT in the UK¹ with over GBP260 million in assets under management², this is the latest in a run of high profile exits including Zoopla Property Group and graze.com. Titan VCT, which is currently open for investment, focuses on backing talented entrepreneurs looking to build big global business and gives investors the opportunity to invest in a well-established and diverse portfolio of around 50 smaller companies, which has been built up over the last eight years.
Octopus Ventures, which manages Titan VCT, is one of the most active venture capitalist investors in Europe. Alex Macpherson (pictured), fund manager of the Titan VCT and head of Octopus Ventures, says: “Today is a huge day for SwiftKey and we are thrilled for Ben and Jon the co-founders of this fantastic business. The entrepreneurial scene in the UK is thriving, and as the largest VCT in the UK, we are lucky enough to attract some of the best investment opportunities within this sector and work with some of the most talented entrepreneurs. Our latest fundraise gives investors the opportunity to support both established and developing portfolio companies as well as new businesses.”
The Titan VCT share offer is open until 1 September 2016, but may close earlier if the fundraising target of GBP50 million is met. The minimum investment is GBP5,000. The maximum investment still qualifying for income tax relief is GBP200,000.